2016 Taxes: Will Families Win or Lose ?

As we celebrate family day with our families, it also marks the start of another tax season. Taxes for families will be a mixed bag this year as a tax rate cut comes with a cut in tax credits too.
So, the big tax changes that will impact the tax bill for families are the following:

Middle Class Tax Rate Cut

The tax rate has been reduced from 22% to 20.5% for middle class earning individuals for the tax bracket for income between $45,282 and $90,563. This will not impact any tax payers that have an income below $45,282.

Tax Increase for High Income Earners

The tax rate has increased from 29% to 33% for all individual taxpayers making an income higher than $200,000. This tax increase has been made to compensate for the tax revenue loss that would be caused by middle class tax rate cut

Income Splitting Discontinued

The income splitting used to save up to $2000 for a lot of families with children where one spouse had income in a higher tax brackets as compared to the other spouse. This tax credit was extremely popular in families where one partner was making little and no income and the other partner was making most of the family income. The income splitting is no longer available for the 2016 Tax Year

Children’s Fitness and Arts Amounts Reduced

The fitness and arts amounts have been reduced by 50% for the 2016 Tax Year. The maximum eligible fitness amount is $500 for the 2016 tax year whereas the maximum eligible arts amount is $250 for the year. The fitness and arts amounts have been discontinued starting 1st January,2017 and will not be available for the 2017 tax season.

So overall, if you are couple with no children and making similar incomes, you will be most likely paying less in taxes this year unless you make more than $200,000.

If you are family where only one spouse was working and you were spending money on fitness and arts activities for your children, you might end up paying more or about the same in taxes depending on your income information.

If you are a family where one spouse makes more than $200,000 and the other spouse was not working and you used to take advantage of the arts and fitness amounts for children, the tax bill will be significantly higher this year as you pay a higher tax rate with no income splitting or fitness and arts credits.

Visit a Softron Tax location today to call 905-273-4444 for an appointment to plan and file your taxes with an expert

Selling your Principal Residence? Tax man wants to know

tax-man

The Government of Canada is taking multiple steps to manage and improve housing affordability for millions of middle class Canadians.

So, to ensure tax fairness and plug tax loopholes around capital gains exemption on sale of a principal residence, the Canada Revenue Agency has made it mandatory for house owners to report the sale of a principal residence on their tax return.

The rule comes into effect for any sales that occurred on or after January 1st, 2016 even though the announcement was made in October 2016.
What does this mean for a house owner?

This means that any Canadian taxpayer who sold his/her house on or after 1st January 2016 must provide all the information to their accountant before the taxes are finalized. The accountant has the responsibility report it to the CRA to avoid any tax liabilities on the sale

The house owners will need to provide the following information:

• Date of purchase of the house

• Amount of sale of the house

• Description of the property

This can be even more complicated if the house that was sold was not your principal residence for all the years you owned. Or if the property was located outside of Canada. If that’s the case, more paperwork will be required.

So if you have sold your house in this year, make sure you discuss this with your accountant as a failure to report the sale can attract penalties of up to $8000.

You can visit any Softron Location near you or call 905-273-4444 and we will be happy to help you with your reporting requirements.

https://youtu.be/PV2uBXOgFAw

Gen-Y Taxes: Tax planning leads to financial planning

If you still haven’t thought about filing your 2015 taxes the time is just about right. Millennials in Canada have a lot to worry about:  Student debt, saving for an emergency fund, planning further education and the ultimate dream of buying a house.

You will be surprised to know that planning your taxes efficiently can help you out in achieving our long-term and short-term financial goals. Here are a few things that can help Millennials plan their taxes and finances efficiently

  • RRSPs: RRSP contributions can be Gen-Y’s best friend.  RRSP is not just for retirement savings. RRSP accounts can also be used to save for further education under the Lifelong Learning Plan or buying a house under the Home Buyer’s Plan. HBP and LLP present an amazing opportunity for Millennials to save for future goals and get the tax deductions on their savings at the same time.               It may be noted that getting the maximum benefit from these plans can be complicated and should be done under the guidance of a professional tax accountant like professionals at Softron Tax
  • Student loan repayment: Repaying student loans sucks! However, you can claim the interest paid on student loan when filing your taxes.
  • Tuition Credit: If you filed your taxes and claimed your tuition receipts during the years you were in school, there’s a good chance that you can save big on your taxes now when you have taxable income. If you did not claim your tuition receipts, rush to a Softron Tax Office today to figure out how you can rectify the situation.

The key to maximizing your benefit is efficient, customized and smart tax planning. What might be a great tax plan for you may turn out to be a disaster for someone else. Therefore, it is critical that you talk to a tax professional today and plan your taxes in a way that will benefit you the most.

As we say, let’s do it right !

RRSPs – A friend or a foe ?

The RRSP  season is in its prime and the deadline for RRSP contributions for the 2015 Tax Year is February 29th, 2016. It’s a leap year and the first 60 days of the year end on Feb 29th.

Every year thousands of people invest in RSSP’s and a lot of them just do it because they have been advised by their friends or sales managers selling RSSPs.

So is RRSP your friend or foe?

RRSP as the name suggests can be an exceptional retirement saving tool for but only for people who need it. One man’s garbage can be another man’s treasure.

RRSP is not a tax free or a tax saving scheme. It is a tax deferral plan in which you save on taxes when you contribute and you end up paying taxes at a later date when you withdraw money from the RRSP accounts. Ideally an individual should be having a higher taxable income and should fall in higher tax bracket during the contributing(working) years and the individual should be in a lower tax bracket during the withdrawal(retirement) years. Lets solve this puzzle.

RRSP is your friend if:

  • You make more than $44,000 Approx. (Lowest Tax Bracket) in Ontario and there will be a time in future (Retirement Years) when you will be making less than $44,000 annually.
  • You have no pension plan from your employer and you want/have to save something for the retirement years. These savings will be strictly for retirement purposes.

RRSP is your foe if:

  • Your income is less than $12,000 dollars and you are just trying to save some money.
  • You have generous pension plans (Unionized Workers) and chances are that your tax bracket will not change when you retire.
  • You have an investment portfolio otherwise which will generate income in your retirement years and as a result your tax bracket will not change
  • You are trying to save money for an emergency fund and you may need this money any time in the future.  A TFSA account should be used for savings and investments that are not long term and not for the purpose of retirement.

Retirement Planning is very important and a general habit of saving money goes a long way in life but RRSP may or may not be the answer. We at Softron Tax  always tailor our advise according to the needs of the client. One size fits all policy does not work well with personal finances.

So visit the nearest Softron Location today and we will help you decide whether RRSP is your friend or a foe.

Tax season is back! Are you Ready?

The tax season is back and like every year in the past, Softron tax is ready to serve you and get you the biggest refunds.

So are you ready?

Each year taxpayers miss out on a lot of money that they could have received through their tax refund. This happens because taxpayers miss out on claiming important credits that they are eligible for. Today we discuss the credits that every taxpayer in Canada can claim irrespective of his/her marital status, number of dependents or age.

Following are the credits that every taxpayer maybe eligible for:

  • Public Transit passes: Every taxpayer can claim their public transit passes and receive additional tax refund. The only check in the case of public transit passes is that the taxpayer must have either monthly passes or three consecutive weekly passes or presto usage report. It is not possible to claim just a few tokens or randomly bought tickets.
  • Donations: Every taxpayer can claim the donations they make to eligible charitable organizations in Canada. All you need is a donation receipt. That’s not all. If you have missed claiming your donations in the past 5 years, you can claim them altogether in the present tax year and this will only increase your donation credit. So help yourself while you are trying to help others.
  • Political Contributions: 2015 was the election year and a lot of you will be surprised to know that you can claim the political contributions you made during the year. Political contributions can be either federal or provincial and this is important as contributions made to a provincial political party qualify for a refundable tax credit while the contributions made to a federal political party qualify for non-refundable tax credit.
  • Medical Expenses: If you have had any major medical expenses (dental, eye surgery, prescriptions) where you had to pay a lot out of your pocket, you can claim those medical expenses and reduce your tax payable. The medical expenses have to be more than 3% of your income.
  • Rent: While the rent has no impact on an individual’s taxes, rent can be claimed for availing Ontario’s Rent and Property Tax Grant which is part of Ontario’s Trillium Benefit. There can be cases where the taxpayer will not benefit from the rent because the income he made during the year is above the threshold limit but it is important that the rent is discussed with the tax preparer and it is ensured that maximum benefit is claimed.

The professionals at Softron Tax are very competent to get you all the tax credits that you are eligible for but more importantly, we at Softron have a work ethic and an attitude to use all our competence and ability to get the maximum benefit for our customers.

So visit your nearest Softron Tax location and get the tax credits you deserve!